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Today’s China Readings July 25, 2012

Expect Beijing to issue an updated death toll from the weekend flooding in Beijing that is much higher than the current 37 victims. The Fangshan District head has said that there are significant casualties in his district (房山区区长：雨灾造成重大人员伤亡) and the government is making statements that appear to be attempts to prepare public opinion for a much larger number.

This catastrophe could surpass the 2003 SARS outbreak in its test of the Beijing leadership, especially as it is now playing out in real time on Sina Weibo, a service which has become digital sulfuric acid to the government’s credibility. The leadership appears to realize that attempts at covering up the death toll will only make things worse. But assigning responsibility is complicated as Guo Jinlong, the new Party Secretary, was mayor of Beijing from 2008 until earlier this month.

While the likelihood of major conflict remains low, all of the trends are in the wrong direction, and prospects of resolution are diminishing.

Let’s hope so…

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The ordination of Shanghai’s new bishop this month was one for the history books. No sooner had his fellow bishops laid hands on Thaddeus Ma Daqin than he announced his resignation from China’s state-sanctioned Catholic Patriotic Association. After the congregation broke into spontaneous applause at the ceremony, the authorities took him directly to jail, or at least some form of house arrest where he is unreachable. Officially he is on a “retreat.”

BEIJING—The World Trade Organization has set up a panel to probe China’s rare-earth export policies, a widely expected move following requests by the U.S., the European Union and Japan, the trade body said in a report on its website Tuesday.

In fact, he’s one of Russia’s richest men—the CEO of what is arguably the most important Internet security company in the world. His name is Eugene Kaspersky, and he paid for almost everyone in the audience to come here. “Buenos dias,” he says in a throaty Russian accent, as he apologizes for missing the previous night’s boozy activities. Over the past 72 hours, Kaspersky explains, he flew from Mexico to Germany and back to take part in another conference. “Kissinger, McCain, presidents, government ministers” were all there, he says. “I have panel. Left of me, minister of defense of Italy. Right of me, former head of CIA. I’m like, ‘Whoa, colleagues.’”

China’s apparent oil demand fell for the first time in three years in June, according to a Platts analysis released Monday of recent Chinese government data. Demand declined by 1.9% year on year to 36.84 million metric tons last month and was the first contraction since a 2% drop in the first quarter of 2009 in the wake of the global financial crisis, Platts said

Although China’s gross domestic product ranks the second in the world, it still told itself: the development opportunity coexists with the risks and challenges; China will not rise sharply and the United States will not go downhill easily. Today, the sober strategy and strategic consensus of China are scientific and peaceful development and good and fast development, making progress while ensuring stability.

Wang Hao, of the China Institute of Water Resources and Hydropower Research, said that more than 80 percent of Beijing’s roads were covered in impermeable materials such as concrete and asphalt, which obstructed the infiltration of rainwater.
However, an investigation led by Li Haiyan, a professor at Beijing University of Civil Engineering and Architecture, said that about half of the drainage networks in Beijing were filled with sediment as thick as 10 to 50 percent of the pipes’ diameter.
Sheng Minzhi, an engineer at the Hangzhou Planning Bureau, said the mass construction of tall buildings and underground parking lots in some cities had also slowed the rate at which the ground can absorb rainwater

The Chinese government collected much less tax in the first half of this year as the economy expanded at its slowest pace since the depth of the global financial crisis, according to data released by the Ministry of Finance (MOF) on Tuesday.
Tax revenues rose only 9.8 percent year-on-year to reach 5.49 trillion yuan (866.76 billion U.S. dollars) in the world’s second-largest economy during the first six months, according to the MOF

China’s State Council, or cabinet, said Tuesday that the country will send eight teams later this month to inspect the implementation of property regulation policies by local authorities.
The move aims to “further ensure that the property regulation measures are implemented, speculative housing demand is curbed, and to strengthen the effects of the property regulation measures,” the State Council said in a statement.

Chinese President Hu Jintao (R) meets with U.S. President Barack Obama’s top security advisor Thomas Donilon at the Great Hall of the People in Beijing, capital of China, July 24, 2012. (Xinhua/Li Tao)

Apple today noted in its earnings call for Q3 that two-thirds of its Asia Pacific revenue is coming from Greater China at the moment. CEO Tim Cook noted that revenues in the country were $5.7 billion for the quarter, 48 percent increase on last year, and still growing at an “incredible rate.” To date Apple’s revenues in China for the year now total $12.4 billion. To compare, in 2011 the company made $13.3 billion in China…
n addition to launching the iPhone 4S in January Apple added China Telecom as a second carrier in March. He also noted that “Normal seasonality,” was also a factor, but “We did not see something that we would attribute to the economy in China.”
Cook also mentioned that in fact China’s iPhone sales were very strong. Over 100 percent year-on-year, he noted.

On June 28, the Obama administration granted China an exemption from U.S. sanctions on the Central Bank of Iran (CBI) for significantly reducing its crude-oil purchases from the Islamic Republic. This suggests that one of the biggest carrots Washington can offer to China in exchange for greater support for the U.S. sanctions regimen is expanded opportunities for China’s national oil companies (NOCs) to invest in oil and natural-gas exploration and production in the United States. The greater the stakes that China’s NOCs have in the United States, the thinking goes, the greater the chance they will think twice about doing business in Iran.

China showed off an elite helicopter unit to foreign media on Tuesday in its latest bid to address concerns about its growing military might amid increasingly aggressive moves to assert its sovereignty over the South China Sea.

The policy opinion has a slight “ripped from the headlines” feel, reflecting the threats that must be looming large for Chinese policymakers. There is a large section that deals with strengthening industrial control systems for nuclear facilities, aviation, oil and petrochemicals control networks, electrical systems, and transportation systems that immediately brings Stuxnet to mind. Another section focuses on securing government and other confidential information systems that could be the target of espionage exploits like Flame, or Anonymous and other political hacktivists. And the large-scale data breaches that were part of the attacks on Tianya, China Software Developer Network, and 360buy.com are covered in a section on protecting personal information and user data. There is, however, also a great deal of continuity with earlier plans for information security. The 2003 “Document 27: Opinions for Strengthening Information Security Assurance Work,” for example, also stressed the protection of critical infrastructure, and both the 2003 and 2012 opinions note the need for dynamic monitoring of the Internet as well as talent development and greater leadership and coordination.

MissXQ, who has done excellent work on Twitter following the floods up north, has translated a heartbreaking tale of a girl in Beijing who chronicled her search for her dad on Sina Weibo after the deadly floods drowned parts of the city.

The current drainage system dates from the 1950s and is based on a Soviet design, which relies on pipes rather than sewers to direct excess water. As 20th-century planners filled in many of Beijing’s canals, moats and waterways, residents were forced to rely on this creaky relic of Sino-Soviet co-operation to keep their streets from flooding when it rained.This infrastructure, self-evidently, is no longer good enough

The city of Beijing shot back on Tuesday at skeptics who questioned the official death toll from floods that swamped the capital over the weekend, continuing an unusual effort to engage critics in the wake of one of the Chinese capital’s worst disasters in recent memory.

China Development Bank (CDB) and its investment subsidiary plan to help Chinese companies listed overseas go private and relist on domestic or Hong Kong bourses.
The policy bank’s Hong Kong branch has already provided a US$1 billion loan to help Chinese public companies leave the U.S. stock market to return to domestic markets, a process also known as public-private-public (PPP), a CDB source said.

Major real estate developers have apparently accepted the stubborn determination of government policymakers by finally turning their attention toward commercial properties – in a big way.
In the city of Chengdu, for example, developers have proposed or have started building 30 skyscrapers for an all-new financial center. Each building would be at least 60 stories high.
More than 90 commercial complexes are under construction in Chengdu, which last year was ranked the nation’s No. 1 city for new project starts in the commercial real estate sector.

Despite being dealt the ass-walloping humiliation of a one-hour radio special dedicated solely to the retraction and refutation of his pile of lies, thespian and self-proclaimed “noted fabulist” Mike Daisey is once again telling his anti-Apple story to audiences in the US. This month, Daisey takes a new version of The Agony and the Ecstasy of Steve Jobs to Washington DC’s Wooly Mammoth Theater, where, on August 4, Apple co-founder Steve Wozniak will take the stage for a post-play discussion of the work.

Beijing’s propaganda chief has ordered Chinese media to stick to good news about weekend floods, according to a report, after the death of at least 37 people sparked fierce criticism of the government.

China’s property stocks rose, with the gauge tracking developers on the Shanghai Composite Index advancing for the first time in five days, after a report that said the city of Nanjing offered incentives for some homebuyers.

Tencent is the world’s fifth-largest Internet company by market cap, but much of its revenue has come from one sector: games. A new report, however, shows that the company is plotting to expand its empire by moving aggressively into ads and ecommerce.

And this is where this week’s flooding in Beijing comes in. Occurring at the moment of leadership transition, the flooding must heighten concern among the political elite, creating as it does the impression of a weakening of the Mandate precisely when they are are (erroneously) trying to transfer the Mandate.Moreover, the popular outcry over the flooding is a reminder of a larger problem for the Party: its institutional incapacity for calibrating popular opinion. Elections would serve this purpose in a more systematic manner, but Leninist Party stalwarts resist genuine political competition. Instead, we get episodic outbursts of popular outrage and hurried adaptation by the powers that be. That has worked for some time, but it may not be the most effective way of gauging what the people are seeing and hearing.

Recent reports of women being coerced into late-term abortions by local officials have thrust China’s population control policy into the spotlight and ignited an outcry among policy advisers and scholars who are seeking to push central officials to fundamentally change or repeal a law that penalizes families for having more than one child. Pressure to alter the policy is building on other fronts as well, as economists say that China’s aging population and dwindling pool of young, cheap labor will be a significant factor in slowing the nation’s economic growth rate.

Flash manufacturing PMI picked up modestly to a five-month high of 49.5 in July, suggesting that the earlier easing measures are starting to work. That said, the below-50 July reading implied that demand remains weak and employment under increasing pressure, calling for more easing efforts to support growth and jobs. We believe fast falling inflation means Beijing can afford such moves, and more meaningful improvement of growth is expected in the coming months once these measures fully filter through.